EOFY

What use would a 30 June post be if it wasn’t about tax? Many of us probably remember the deals that were done

between the Commonwealth and the States when the GST was introduced (20 years ago tomorrow). A number of state imposts (remember FID on deposits?) were abolished in exchange for a share of GST revenue.

I had forgotten that the Commonwealth hasn’t always been in charge of income tax. After federation and up until WW2 the states levied income tax at different rates under different administrative regimes and each with under their own legislation. It also created some interesting jurisdictional issues. For instance: was Alfred Deakin’s salary as a minister of the Commonwealth, so far as it was earned in Victoria (where he was resident) subject to Victorian income tax? The High Court applied D’Emden v. Pedder (i.e. a state law can’t interfere with the executive power of the Commonwealth) and answered “no” (see Deakin v Webb (1904) 1 CLR 585).

If that wasn’t bad enough, imagine the negotiations that went on in 1942 when the Commonwealth needed war finance and suggested that the states vacate the income tax field for 2 years and allow the Commonwealth to be the sole income tax collector. Compensation was to be paid. Perhaps not surprisingly, the states were suspicious and rejected the proposal. That was to no avail when the Commonwealth passed four acts which imposed a uniform tax scheme (exercising “might of way”). Constitutional issues over which power was being used as a basis for the scheme (was it the taxation power or the defence power?) arose…. you can read the High Court’s decision in the  First (yes, there was a second one) Uniform Tax Case for yourself (1942) 65 CLR 373.

Who would have thought that tax history could be interesting ….. happy new financial year.

Creative commons acknowledgment for the photograph.